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photo: BRYAN DERBALLA FOR THE WALL STREET JOURNAL (PATRICIA ROSA)
OVERVIEW More employers are conducting credit background checks on applicants for some positions, figuring that the financial information can offer insight into a candidate’s level of responsibility Critics of the credit checks say they create a vicious cycle that prevents those who most need jobs from getting them Refusing permission for a background check could be a deal breaker LINKS NEW HOPE: Americans return to the job hunt Article ON THE OUTSIDE: Grim outlook for college grads Article
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History Lesson
By KRISTEN MCNAMARA After three rounds of interviews for a sales position with Prudential Insurance, Patricia Rosa received a letter in February saying her job application was denied, based on information turned up in a background check. The only blemish on her record, she says: Poor credit that built up since she lost her job two years ago.
Unemployed and in debt, Ms. Rosa is among a growing number of job hunters who find their financial past interfering with their professional future. More and more employers are conducting credit background checks on applicants for some positions, figuring that the financial information can offer insight into a candidate’s level of responsibility. But people whose credit has been damaged by the economic downturn say they are victims of circumstances beyond their control. Critics of the credit checks say they create a vicious cycle that prevents those who most need jobs from getting them. Lawmakers are pushing for change. U.S. Rep. Steve Cohen (D., Tenn.) has proposed a bill to prohibit the use of credit checks during the hiring or firing process, with certain exceptions. And some states have passed or proposed laws to restrict employers’ use of credit checks. ‘LONGER-TERM SNAPSHOT’ A Prudential spokeswoman says the company doesn’t comment on specific applicants but that each candidate authorizes the company to conduct a background check, which may include a credit check. Ms. Rosa believes it was her credit woes that cost her the opportunity at Prudential. A 49-year-old single mother of three, Ms. Rosa fell behind on her mortgage and other bills a few months after losing her job as office manager for a mortgage company in early 2008. She is now searching for positions outside financial services, believing other industries will be more tolerant of her debt. Federal law gives employers the right to conduct background checks on current and potential employees through third-party companies, with the individual’s approval. Some 47% of employers say they check the credit history of applicants for certain positions, according to a 2009 survey by the Society for Human Resource Management. Companies typically look back over a period of years for patterns in applicants’ behavior. “It’s a longer-term snapshot to see if that’s indicative of fiscal responsibility,” says Mike Aitken, the society’s director of government affairs. The vast majority of employers who conduct credit checks do so for jobs with financial or fiduciary responsibility, such as accounting, budgeting, managing others’ money or those involving cash or sensitive credit-card information. Nearly half the respondents also consider the credit of candidates for senior executive positions. Common roadblocks to a job offer include lawsuits or other legal judgments outstanding against the candidate, or multiple accounts in debt collection, according to the survey. BETTER SAFE Legend Financial Advisors, which has about 20 full-time employees, conducts a background check that includes credit inquiries for all new job finalists, says Diane Pearson, a financial adviser at the firm. The firm had its first encounter with a candidate’s poor credit last year, she says. A college student applying for a summer internship had a history of unpaid bills and bounced checks. The firm decided to bypass the candidate. Knowing what is on your credit report and offering an explanation for debt caused by a specific event could keep negative information from derailing your employment chances. First, be sure you understand what employers can see on a credit check and make sure you understand your report so you can explain any problem areas. A credit report includes debt, bill-paying history, number and types of accounts, how long you’ve had them, and whether you’ve been sued or have filed for bankruptcy, among other factors. Information can go back seven years—or 10 years for bankruptcies. You might be tempted not to authorize a potential employer to conduct a background and credit check. But refusing permission is likely a deal breaker, career counselors say. Employers will assume you are hiding a serious problem, and in today’s job market, they won’t have trouble finding a more forthcoming candidate.
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